The Demsetz’s Evolutionary Theory of Property Rights as Applied to Rural Land of China: A Supplement

Abstract

The main objective of this article is to contribute to the literature on land issues, especially with regard to the evolutionary theory of China’s rural land property rights. This article applies the Demsetz’s evolutionary theory of property rights as a framework into an analysis of the evolutionary process of property rights in rural land of China. It is found that externality, compactness, productivity, and organizational complexity—four principles in Demsetz’s framework—are at the core of understanding the evolution of property rights from collective control of land to family based control of land in China. However, the framework is incomplete due to being unlikely to notice the role of land titling so that a property rights game is developed in this article to extend the evolutionary theory of property rights. Importantly, it suggests the necessity of “split-rights” from family based control land to private control land in China. To sum up, this paper refreshes the dominant framework of analysis on the evolution of property rights in mainstream economics, and makes it discern when collective ownership does not evolve into pure privatization, finally, instead of into private control of land, as is currently applied to rural area in China.